With mortgage rates and housing inventory on the rise, prospective homeowners have some tough decisions to make. One of these is whether to buy or build a new home.
The decision will come down to your budget, location and goals for your new home. Here are the pros and cons of both options:
1. Customization
The biggest advantage of building a home is that you get to customize the house to your specific taste and lifestyle. This includes everything from paint colors and finishes to kitchen appliances and fixtures. In fact, even tract homes within subdivisions usually offer a few style choices like cabinetry and flooring options to help you create your dream home.
Building a home also gives you the opportunity to incorporate “smart” features that make your house more energy efficient and convenient, such as remote control lighting, heating and appliances. These features are often more difficult or impossible to add into older homes.
On the other hand, building a home can be more time-consuming and expensive than buying an existing one. It can take more than six months to build a house, which may not be an ideal option if you’re in a rush to move.
Additionally, you’ll likely have to compromise on the size and location of your home if you build from the ground up. This can be difficult if you have certain specifications in mind or have a particular neighborhood in mind.
Finally, building a home can be more stressful than buying an existing one because of the potential for construction delays. This can be frustrating, especially if you’re working with a tight deadline. It’s important to vet builders carefully before hiring one and include time-of-essence clauses in contracts. These can help you avoid unforeseen issues and stay on schedule. However, the extra stress of building can be worth it in the end when you get to live in your dream home. Plus, the extra work can help you save money in the long run by avoiding costly repairs and replacements.
2. No Competition
As much as buyers love to customize their homes, they can also be limited by what’s available. This means that if they aren’t happy with a home on the market, or their desired property is no longer available, they may be forced to build their dream home. This is especially true in a seller’s market.
Another disadvantage of building is that it can take a long time. Depending on the size of the home, it can be more than six months before it’s ready to move in. This can be frustrating for buyers who are eager to get settled in a new home and can lead to higher expenses for temporary housing.
If a buyer chooses to buy an existing home, they can simply find an agent, apply for a mortgage, have their offer accepted, close on the house, and move in. This is a faster process than building and may be more appealing to those with tight timelines or who don’t want to wait for construction to finish on their home.
One thing to keep in mind when comparing buying and building is that it’s difficult to negotiate prices with builders. This isn’t always a deal-breaker, but it should be taken into consideration when making the decision to build or buy.
In addition to avoiding the stress of finding an existing home, buyers can also avoid unforeseen extra costs that come with building by working with a reputable contractor and sticking to their budget. This includes things like miscellaneous materials, hidden fees, and other unforeseen expenses that can add up quickly. This makes buying an existing home a less expensive option, particularly in areas where building isn’t as common as it is in urban centers.
3. Flexibility
If you build a home, you have the ability to make changes to your plans and specifications. You can also make upgrades over time, as you have the money. However, the downside is that the process can take longer than buying an existing home. This is especially true in hot markets, when you can find yourself in a bidding war.
If building a home is not in your budget, you can consider a spec house, which is already built and ready for possession. This option can be less expensive than building a custom home, but you won’t have the opportunity to customize it to your preferences.
The advantage of flexible housing is that it can adjust to changing circumstances, according to the researchers. For example, if you have a hobby that takes up a lot of your space, you could use the room as a dedicated studio instead of having to share it with your children or partner. Alternatively, a flexible home can provide an income generation option, if you create a self-contained apartment that can be rented out.
Another benefit of flexibility is that it makes it easier for people to move from one location to another. This can be useful for older adults who want to stay in their communities and enjoy the social benefits of living close to their relatives. Moreover, it can support intergenerational living and enable parents to live closer to their children.
Researchers point out that the flexibility of homes can be improved by using modular design and constructing elements of the property with the possibility to re-use them. However, the interviewees noted that a major obstacle is to find solutions for flexible apartments. The authors recommend that the builders and residents focus on multifunctionality and adaptability, rather than on external transformations, since these require a large investment (Tarpio et al., 2021).
4. Stability
Homeownership is a huge financial responsibility. When you purchase a home, you are taking on the responsibility of paying for property taxes and maintaining your house for the long term. However, if you are willing to make the commitment, then owning a home has significant financial benefits that can pay off in the long run.
One of the biggest advantages of buying a home is building equity and gaining stability. Over time, homeowners build equity by paying down their mortgage and as property values rise in their neighborhood. This gives them a sense of stability and wealth as they grow their families in their homes.
When it comes to weighing the pros and cons of purchasing versus building a home, it all boils down to your situation and goals. Weighing your options and consulting with a real estate agent is the best way to get all of the facts and decide on the right decision for you and your family.
For example, if the home you want doesn’t exist in your neighborhood yet, building a home may be an option because you can choose where you want to live and your dream home will be built for you. On the other hand, if you are on a tight timeline and need to move into a home quickly, purchasing an existing home might be the best solution. Contact the Ramsey team to discuss your home-buying needs today. We would be happy to help!
5. Long-Term Investment
Home ownership is a major financial decision, and it can be equally as expensive whether you buy or build. However, there are a few key differences to consider that can have a significant impact on your budget.
For example, when you purchase an existing home, you may have to pay for repairs or upgrades that come with the property. The cost of these things can quickly add up, especially in an older home with many existing elements. When you build a new home, you can design your house to incorporate energy-efficient technologies and features that can save you money over time while also protecting the environment.
New homes also typically come with a warranty, which can help protect you from unexpected repair costs in the future. In contrast, most existing homes do not include a warranty and you will have to pay for these expenses out of pocket.
Another thing to consider when deciding on buying or building is your timeline. If you have a tight deadline, it may be better to buy an existing home rather than waiting for a construction project to finish. In addition, purchasing an existing home can be a more efficient way to get into your dream home if inventory levels are low in your desired area.
Ultimately, it’s important to weigh the pros and cons of each option when making your decision. These factors will help you decide if purchasing an existing home or building your dream house is the right fit for your needs and lifestyle. If you need further guidance on this topic, it’s always best to consult with a real estate agent and/or financial professional.